Date of publication: June 12, 2006
Source: Financial Times
Supermarkets and clothes chains alike have realised that shoppers view the ethics of sustainability and ecological responsibility as core to their buying decisions, writes Elizabeth Rigby
By Elizabeth Rigby
When Sir Terry Leahy stood up in May and declared that Tesco, the UK supermarkets group of which he is chief executive, was putting local and ethical sourcing, recycling and greener energy production at the heart of its corporate culture, the retail world's ears pricked up.
Sir Terry, delivering a speech to a room filled with green activists and local town planners at the Work Foundation in London, declared that the rules of engagement in retailing were subtly shifting.
"The battle to win customers in the 21st century will be increasingly fought not just on value, choice and convenience but on being good neighbours, being active in communities, seizing the environmental challenges, and on behaving responsibly, fairly and honestly in all our actions."
That the chief of the UK's biggest supermarket chain pushed the ethical consumer from the fringes of retailing on to the centre stage was a seminal moment. In the days that followed other retail chains were tripping over themselves to spell out their environmental and ethical credentials.
But the trend towards more ethical consumption long predated Tesco jumping on the bandwagon.
Marks and Spencer has been one of the strongest advocates of ethical consumption, switching all its tea and coffee to Fairtrade in April. It is also the first big high street chain to sell men's and women's T-shirts and socks from Fairtrade cotton, and this month started selling Fairtrade jeans.
Meanwhile, in February, rock star Bono launched the "Product Red" brand, which will dedicate some of its revenues to fight Aids in Africa.
American Express has unveiled a credit card that is being marketed in the UK to "conscience consumers". The Gap T-shirt launched under the Red brand is entirely African from the raw cotton to the finished product.
Fairtrade products, once rare outside specialist shops, are now in the UK's biggest chains. Britain's Fairtrade market was worth Pounds 140m in sales in 2004.
Meanwhile, demand for eco-clothing is booming. Sales of items such as organic cotton, Fairtrade clothes and garments made from recycled material rose 30 per cent to Pounds 43m between 2003 and 2005, according to Co-operative Bank.
The trend is such that retailers are struggling to secure enough supply to satisfy their greener customers.
Companies have, in part, become far more aware of ethical consuming having watched what can happen to businesses if they - often unwittingly
- cross over to the wrong side of the ethical tracks.
Nike was dogged by allegations in the late 1990s that some of its products were made in sweatshop conditions and even by children.
Some determined campaigning forced companies such as Nike and Gap to examine their vast webs of sub-contractors and commit to clamping down on child labour, unsafe conditions and worker maltreatment.
When it comes to ethical conduct and social responsibility, fashion brands have sometimes displayed a poor track record because outsourcing to low-cost contractors in developing countries typically resulted in distant relationships in which labour practices were hard to police.
The latest to be threatened by such claims was Inditex, the owner of fashion chain Zara, which was alleged last month to have used suppliers in Portugal which in turn had employed child labour.
Within a week Inditex had investigated the claims and said it had not found signs of child labour. But it also said it would ask the Portuguese ministry of labour and local bodies in the northern region of Felgueiras to assess the social and labour reality in the region and look at whether children were being asked to help parents with sewing at home.
The speed, and seriousness, with which Inditex moved to investigate such allegations reflects the damage that a brand can suffer, particularly as Inditex, alongside other retailers Levi Strauss & Co, M&S, J. Sainsbury and New Look, has sighed up to the Ethical Trading Initiative, whose code does not allow child labour.
Ipsos Mori, the research company, says that 92 per cent of consumers in a recent poll agreed that companies had a responsibility to check that suppliers around the world were behaving properly, while 82 per cent of respondents said a high degree of social responsibility was important when choosing a product or service.
A report on ethical consumerism released last year by Co-operative Bank found that people were increasingly willing to put their money where their conscience is and buy "ethically" across a range of products, including energy-efficient electrical appliances and transport.
Sales of higher-rated energy efficient appliances rose 24 per cent between 2003 and 2004, and are now half the total market.
The evidence suggests that ethical consumers are becoming more of a force.
It also looks like the ethical consumer is here to stay - particularly as younger people tend to be more tuned into ethical and sustainable consumption.
Nick Harrison, a retail specialist at consultancy Mercer, says: "If you look back to an issue such as organic food, a few years ago it was a much-hyped but actually fairly niche issue.
"However, over the last five years it has steadily grown in terms of market share and is actually quite mainstream today - just think about the recent buyout of Green & Black's."
In ethical consumption, all the evidence suggests it has hit the mainstream and is here to stay.